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Germany openly clashed with the European Commission today over proposals to make it easier for the European bailout fund to be tapped by stricken banks.

Amid rising concern over the health of the Spanish financial sector and a dangerous spike in Madrid’s cost of borrowing, the Commission suggested that the euro area’s rescue facility should be able to inject money directly into struggling lenders.

The Commission also said that Europe should set up a “banking union” that allows countries better to share the cost of failures in the industry.

However, the German Government immediately reiterated its opposition to allowing the